GOP Tax Package May Be Delayed

The White House’s push to quickly pass a major package of tax cuts through Congress is facing a fall calendar full of legislative land mines, potentially delaying a key part of President Donald Trump’s agenda into at least 2018.

The Trump administration sees tax cuts as an achievable victory after a string of failed attempts to pass other parts of the president’s legislative agenda, as well as a proposal that could unite a party fractured over Senate Republicans’ failure last week to vote through a repeal of parts of the Affordable Care Act.

Trump touted the tax proposal Tuesday in a meeting with business executives, saying his team was “pursuing bold tax cuts” to help companies grow.

“We’re unleashing a new era of American prosperity perhaps like we have never seen it before,” he said at the meeting.

Republican leaders in Congress, however, face a pair of deadlines that are delaying any action on taxes. The current budget is set to expire at the end of September, and unless Congress approves new funding, there will be a partial government shutdown that will close national parks and put hundreds of thousands of federal workers on unpaid leave.

Congress’s most immediate concern, however, is the debt ceiling, which the Treasury Department says must be raised by Sept. 29 to ensure that the government can pay its bills. Failing to raise the ceiling could spark a global financial crisis, leading to a stock market crash, a spike in interest rates and a potential economic recession.

The Senate and House are scheduled to be in session together for a total of just 12 days from now until the debt ceiling deadline, giving them little time to focus on tax cuts.

“September will be a month when the Trump administration faces its most significant test on Capitol Hill,” said Brian Gardner, Washington policy analyst for Keefe Bruyette & Woods, an investment banking firm. “Passing spending bills and raising the debt ceiling must be done.”

Republican leaders face several challenges as they seek to avert a government shutdown or default.

Treasury Secretary Steven Mnuchin met with Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Charles Schumer, D-N.Y., on Tuesday, pressing them to raise the borrowing limit as soon as possible. But the talks ended without progress or even a clear sense of what the Senate leaders must do to deliver votes to raise the limit, according to three people briefed on the meeting who spoke on the condition of anonymity to talk candidly about the private discussions.

Some more-conservative Republicans are demanding that any increase in the debt ceiling – a legislative limit on how much the government can borrow – come coupled with broad plans to cut spending and shrink the federal government, provisions that would probably preclude any Democratic support for the increase.

In 2015, the last time the debt ceiling was raised, the majority of votes to pass the measure came from Democrats after conservatives objected to increasing the limit without spending cuts, despite pleas for cooperation from GOP leaders. That dynamic has not changed, and Democrats believe they still have significant leverage in any negotiations on the borrowing limit.

Mnuchin has warned Congress for months to deal with the debt ceiling, but there are signs that senior White House officials are also starting to worry about the lack of a resolution. They are now openly talking about the need for lawmakers to act quickly.

“To ensure that we have robust economic growth and promote fiscal discipline, the Trump administration believes it’s important to raise the debt ceiling as soon as possible,” White House spokeswoman Sarah Huckabee Sanders said Tuesday.

On the budget, Democrats have said they will not agree to any spending bill that includes money for a wall along the U.S.-Mexico border, but the White House has said repeatedly that it wants that funding to be part of a spending bill.

Lawmakers could approve a short-term spending bill to give themselves more time to negotiate, but that would further postpone any tax discussions because Congress would remain consumed with the budget.

Congress hasn’t overhauled the tax code in 31 years, in part because it is so politically difficult, but White House officials are trying to accelerate talks.

White House legislative director Marc Short said Monday that he wanted everything to be wrapped up by November. National Economic Council Director Gary Cohn said they would consider their effort a success if, when Americans “get their first check in 2018, they have more disposable income.”

But there are signs that Senate Republicans have not decided how they want to proceed.

Sen. Orrin Hatch, R-Utah, who leads the Senate’s tax-writing panel, said on the Senate floor Tuesday that he would pursue a more deliberative process than Congress used during the health-care discussions, holding public hearings and working closely with Democrats.

Less than an hour later, McConnell poured cold water on that idea, saying that it was unlikely many Democrats would seek to work with Republicans and that they planned to forge ahead on their own if necessary.

He noted that 45 Democrats and independents sent him a letter Tuesday indicating they would not support a tax overhaul plan that widened the deficit, something Republicans have suggested might need to be part of their package. This, McConnell said, would force them to pass a tax bill along party lines using a process known as reconciliation, which first requires them to pass a budget resolution – something they also have not done yet.

“We have been informed by the majority of the Democrats in a letter I just received today that most of the principles that would get the country going again, they’re not interested in addressing,” McConnell said.

Separately, lawmakers must vote to reauthorize a health insurance program for children from low-income families, as well as the federal flood insurance program. Both will be curtailed sharply if Congress doesn’t act.

But it’s the debt ceiling and the spending bill that are expected to consume lawmakers throughout September and potentially beyond, delaying negotiations on the tax plan.

“If you can’t fund the government, and if you can’t make good on the credit of the government, those are bigger than speed bumps,” said Rick Hohlt, a longtime GOP lobbyist. “Those are like running off the cliff. It needs to get everybody’s attention when they focus.”

The White House, for its part, seems to be losing patience with lawmakers as the legislative agenda piles up. Trump was furious that the Senate failed to pass a bill to repeal parts of the Affordable Care Act last week, and Republicans are looking to the tax cut plan as something they could sell to voters as a major accomplishment ahead of the 2018 midterm elections.

Sanders took a shot at Congress on Tuesday, remarking of Trump’s track record so far that “what’s hurting his legislative agenda is Congress’s inability to get things passed.”

Analysts think all these looming decisions are pushing back any action on tax code changes, potentially into next year. Republicans still haven’t resolved key differences among themselves on the tax cut plan, such as its size and whether it should be temporary or permanent.

“Even when you get to tax reform, it’s going to be really difficult and really slow,” said Andy Laperriere, an analyst at Cornerstone Macro, a Wall Street research firm. He said the most likely outcome at this point is that Congress will not get “tax reform signed into law.”